When Maryland bit the fiscal bullet

February 04, 1996|By Peter A. Jay

HAVRE De GRACE -- A popular concept in some conservative circles today is ''devolution,'' the process of removing as many responsibilities as possible from the federal government and returning them to the states.

This is primarily a response to the realization that Washington, as we have only recently been vividly reminded yet again, either can't or won't balance its budget, even with seven years to do it. But the states balance their budgets. In most states, their constitutions require them to.

For Marylanders particularly, as they watch their state government going through painful contortions to trim some $90 million and balance the current fiscal year's budget, it's perhaps useful to remember that it wasn't always thus. Annapolis used to be free to do what Washington does now. Let's go back 150 years. Roll that tape.

In the 1840s quite a few states were in serious financial trouble. Many had come close to bankruptcy during the Panic of 1837, and there was strong public sentiment for tighter controls on both borrowing and spending. But in Maryland it was still business as usual. This meant spending a lot of public money on favored private industries -- ever a temptation to public officials, who always say it's required to keep their state business-friendly and competitive.

Since the 1820s, the General Assembly had been pouring vast sums into football stadia -- no, strike that, into railroads (especially the B&O) and canals (especially the C&O). Maybe the newspapers were warning that if it didn't ante up, Maryland would be considered a third-rate state. Anyway, the Whig-run legislature kept appropriating the money.

Some of it was lent, some simply granted. It was raised by the sale of bonds, often to European investors. By 1840 the accumulated debt was $15 million. The annual interest exceeded $500,000, and there weren't the revenues to repay it. Default loomed, and a special state property tax of 20 cents per $100 was enacted.

The new tax wasn't at all popular, and it cost the Whigs both the governorship and control of the House of Delegates. And guess what? Even the hated new tax wasn't enough. In 1842 interest payments on the debt were suspended, doing no end of damage to Maryland's reputation as a borrower. The state tried to sell its canal stocks, but couldn't find buyers. There was talk about repudiating the debt entirely. (Harford and Carroll counties, especially, favored that idea.)

A new constitution

The situation was plainly untenable, although few politicians wanted to be the ones to fix it. So, as was happening in many

other states at this time, there were calls from populist reformers in Maryland for new constitutional controls on government. The calls generated a powerful popular movement. In 1850 the voters directed that a new state constitution be written. It was, and in 1851 they approved it.

Its major reforms included a state debt ceiling of $100,000, a 15-year limit on state bonds, and a ban on state appropriations for most private projects. It also required the election of all judges, on the theory that only a judiciary directly responsive to the public could guarantee that future state governments would in fact abide by the constitution.

The Constitution of 1851 lasted only 13 years. It was replaced first by an 1864 charter drafted during the Civil War by strong Unionists who insisted on a constitution that banned slavery. Then that document was rewritten in 1867 by Democrats of a different philosophy, who succeeded -- until passage of the Fifteenth Amendment to the Constitution of the United States -- in limiting to right to vote to adult white males.

The 1867 document, much amended, is the constitution in effect in Maryland today. The drafters of its 1851 predecessor would be interested to see that it requires a balanced budget, and still limits state bonds to 15 years. (The fiscally conservative new state treasurer, Richard Dixon, believes that this restriction on longer-term debt is one reason Maryland remains highly credit-worthy today.)

In Maryland and in other states where similar movements took place, popular fury with irresponsible public spending produced reforms that have lasted 150 years and made state government, for all its many problems, a demonstration that it really is possible to match expenses with revenues.

The 1994 elections have been taken by the Gingrich Republicans as a mandate to do the same thing at the federal level. Is it possible? No one really knows. But just for fun, imagine what the national government would be like if Bill Clinton had to balance the budget every year. Then imagine what Maryland's would be like if Parris Glendening didn't have to.